Optimal R&D Investments and the Cost of GHG Stabilization when Knowledge Spills across Sectors
11:00 - 12:00
This seminar is based on a paper co-authored by Carlo Carraro, Emanuele Massetti and Lea Nicita. The present work analyses the effect of a stabilization policy of GHG in the atmosphere on the advancements of the technological frontier of both energy and non-energy sector when the two are linked through mutual intersectoral spillovers. The analysis is performed using WITCH, a dynamic integrated regional model of the world economy. We include intersectoral knowledge spillovers in a version of the model in which R&D investments can be directed towards energy and non-energy inputs. We find that, when a climate policy is imposed, R&D is re-directed towards energy knowledge and total optimal R&D investment decreases, due to a more than proportional contraction of non-energy R&D. However, the reallocation of investment across the two R&D sectors is less dramatic than when spillovers are not modelled, and, as a result, stabilization costs are reduced.